Matthew Sinclair

The spectre at the climate change feast

The spectre at the climate change feast
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Today the TaxPayers' Alliance is releasing a new report which sets out the huge and excessive burden that green taxes impose on families and business across the UK.

At the moment, 14 percent of domestic bill costs are the result of climate change policies.  Increasing the price of energy hits the poor and elderly hardest - which, in turn, increases poverty and benefit dependency.  At the same time, 21 percent of industrial electricity bills are the result of climate change policies.  If we want to make our economy less dependent on financial services, driving up a major part of many manufacturing firms' costs isn't the way to do it.

Despite these costs, the current approach doesn't appear to be achieving the desired cuts in emissions.  It is hard to establish this empirically, as we don't know what level emissions would be at without current policies.  But looking at the data since 1970, I don't think many people would think that a major and escalating attempt to cut emissions had been made since the early 1990s.  Many politicians, environmentalists and senior academics are disappointed with, or sceptical about, the progress which has been achieved.

But the costs are still set to rise massively in the next few years, even without a new deal at Copenhagen.  Citigroup research (not available online, unfortunately) argues that it is possible there will be a 57 percent to 100 percent increase in energy prices by 2020.  That is driven by the need to finance the £161 billion needed to meet renewable energy targets, which comes on top of the £77 billion needed to replace the generating capacity that keeps the lights on.  Thanks to the Government's disgraceful failure to stand up for Britain's interests, we are expected to need to spend far more than other major European economies despite having achieved faster progress than most towards meeting our Kyoto targets.

Combining that with a major fiscal tightening will mean an absolutely intolerable burden on ordinary families.  The poor and elderly will suffer particularly badly, but even those on average incomes aren't going to be able to afford anything like a doubling of already high energy costs.  At the same time, and again in order to pay for that massive investment, energy companies will see their profits rise substantially.  That is when climate change policy will run into an affordability crisis.

Politicians need to understand that, however much they might be willing to sacrifice to cut emissions, the public aren't going to support that.  For too long, the need for policy to be affordable has been the spectre at the feast.  For too long, the possibility of climate change policy bringing about fuel poverty has been ignored.  There is no way that strategy is politically sustainable.

Major changes to the current direction of policy, along the lines we outline in our report, would upset some significant vested interests and others earnestly, but wrongly, committed to the present direction of policy.  But it is going to become a political imperative to stop just adding new layers to the existing mélange of climate change policy, and start working at reducing the cost through serious reforms.  There is a huge opportunity for either party to become the party of low energy prices.

Matthew Sinclair is research director at the Taxpayers’ Alliance